After an explosive few years, the ready-to-drink rise is showing signs of moderating but larger formats of pre-mixed cocktails may be an emerging growth opportunity, according to NIQ during the company’s C360 conference yesterday.
Ready-to-serve (RTS) drinks have emerged lately from some big names – see Grey Goose’s Martini, Jennifer Lopez’s Delola cocktail, and William Grant & Sons’ Milagro Margarita, just to name a few. Those pre-batched cocktails sit in the premium-plus bracket, which is where the biggest opportunity may lie considering overall premiumization trends, according to the NIQ BevAlc team. While RTD growth was at 7% over the last 52 weeks in off-premise channels ending May 13, the premium plus ready-to-serve segment clocked 105% growth, representing $298 million in sales.
“We are seeing some really good growth in the premium plus part of ready-to-serve starting to be a leading indicator of a trend, probably because it is good for consumer conversion,” said Jon Berg, vice president of thought leadership of BevAl at NielsenIQ.
The reach towards RTS is part of the evolution of ready-to-drink products, with spirits-based RTDs and soft drink crossovers the latest in the category evolution kicked-off by rapid growth from hard seltzers. One of the most recent releases, Delola Cocktails, comes from Beam Suntory. The global spirits company has also packaged another premium RTD in its portfolio, On The Rocks, in 750 ml formats following its original 375 ml bottle.
“Premiumization is working because people want to drink better,” said Andrew Esstman, Director of RTD strategy for Beam. “That means better quality ingredients and better brands that resonate.”
Premium plus spirits seem to be slowly catching on to the ready-to-serve opportunity, with much of the high performing SKUs mirroring the spirit growth drivers, tequila and whiskey. Last year, Bulleit Frontier Whiskey debuted a RTS Old Fashioned and Manhattan. Recently tequila producer Olmeca Altos expanded its presence in the cocktail category with the release of a larger format strawberry margarita.
But Esstman doesn’t necessarily like the differentiation between RTD versus RTS, noting that the average consumer doesn’t apply those labels when choosing how to shop. Still, the ready-to-serve category hasn’t effectively premiumized yet, according to Esstman, who sees opportunity in the new formats, adding that premium innovations represent a “rising tides raise all ships” type of boost for the rest of the category. For RTS, the opportunity lies in a compelling proposition and a format that meets the occasion, he said.
“I’m not hung up on whether it comes in a glass bottle or Tetra Pak, as long as you meet the need that the consumer is asking for,” he said.
With the innovation cycle of RTD formats and styles moving at a rapid pace, companies need to be agile, said Esstman. With recent premiumization and home-premise trends, innovation in the premixed cocktails space represents chances to meet consumers looking for more affordable luxuries. There’s also an opportunity for disrupters that don’t come from established brands to make an impact in the RTS category too, much like many of the leaders in the RTD space such as High Noon.
“Can a new brand disrupt RTS? 100%,” he said. “Are they going to have to put their money where their mouth is and invest to make it happen? One hundred percent, but it’s not going to happen overnight.”